Gov. Rick Scott is hoping to attract new property
insurance companies to the state and contends that an influx of capital will
spur competition and drive down premiums.

“My goal is to create an environment where we bring more insurance companies
into the state. Historically, competition keeps prices down,” Scott told The
Florida Current during an interview Friday.

Although lawmakers historically have turned to public sector planning solutions
to bring stability to Florida’s property insurance market after large hurricanes
send private companies scurrying from the state, Scott is counting on private
market competition to reduce rates during a run of calm hurricane seasons.

Hurricane Andrew decimated companies in 1992,
spurring regulatory measures such as the Cat Fund, a
state-backed reinsurer, and eventually, Citizens Property Insurance
Corp., a state-run company. The family of Poe
companies went bankrupt after the 2004 and 2005 storm seasons. State
Farm, formerly the largest property insurer in the state, threatened to
quit Florida altogether but opted to stay after regulators agreed to raise rates
in 2009. Since then, State Farm has largely stopped writing new homeowners
policies throughout the state and has cancelled policies in riskier areas of the
state such as South Florida.

Despite seven straight years without a hurricane hitting the state, the rate of
new companies entering the Florida marketplace has dwindled. Regulators admitted
an average of 1.45 new property and casualty companies per month from January
2009 to December 2010, but less than one per month since then. In 2012, just
seven new property insurers were admitted to the state.

Smaller companies are still entering the Florida marketplace, but it has been
Citizens that has taken on new customers in high-risk areas such as South
Florida where large insurers like State Farm have scaled back underwriting
activity. Citizens has taken over State Farm as the largest property insurer in
the state, and had 1.34 million policies as of Nov. 30.

Scott and other lawmakers worry about the potential for assessments on Citizens
and non-Citizens customers should a cataclysmic storm hit the state. Though
Citizens has the ability to pay claims from another Hurricane Andrew, the
costliest storm to ever hit the state, state officials still worry about the
possibility that a string of mild hurricanes -- like the series of hurricanes
that hit during the 2004 and 2005 seasons –- would wipe out Citizens’ ability to
pay claims and spur assessments.

Because large insurers don’t appear keen on taking on large amounts of risk in
the state any time soon (State
Farm officials told regulators in July they aren’t planning on writing new
policies in Florida), Citizens has tried push existing customers into smaller
companies.

Citizens’ attempts to push out policyholders -- reducing coverage without
reducing premiums and rigorous wind mitigation credit reinspections -- have been
highly unpopular with customers and some lawmakers.

Another Citizens plan to loan surplus money to companies that take over their
policies drew heated criticism. Citizens board members have abandoned plans to
implement the program this year, but hope to bring it back after lawmakers have
had a chance to review the program during the legislative session.

Other proposals to raise the cap on annual rate increases for Citizens and to
allow out-of-state, unregulated companies to take over Citizens policies have
been rebuffed in the Legislature over fears insurance rates would rise.

Still, Scott wants policies aimed at attracting new capital to the state, even
though most of the proposals designed to do that would increase Citizens
premiums.

“So that’s one of the things I want to focus on is let’s do the things that
recruit more companies to come into the state, because I believe that by doing
that you’ll have the opportunity to buy the policy that you want, not the one
that somebody mandates,” Scott said.